How to Register Your Home-based Business in the Philippines

Perhaps you started it as a hobby. You’re doing it part-time. You didn’t expect that you will earn money from it. You’re just doing it at home and you have set up a home office. Now, you want to make your home-based business legal. You want to register your small business. You want to have official receipts and invoices so that you can expand your business, get more customers, and issue such invoices to them. You also want to pay taxes and have income tax returns, which you can use for loan application and other purposes. But you don’t know what to do and don’t know where to go.

If you’re planning to register your home-based business in the Philippines, here are some tips on how to do it:

Know your form of business

In the Philippines, businesses can usually be formed as a sole proprietorship, partnership or corporation. Read this article to learn more about the types of businesses in the Philippines. Partnership and corporations are required to register with the Securities and Exchange Commission (SEC), while sole proprietorship is required to register with the Department of Trade and Industry (DTI) for it’s trade name registration. The two most common forms of companies in the Philippines are single proprietorship and corporation, although there are also a number of Filipinos who register a company as a partnership.

Corporations are required to submit regular reportorial requirements with the SEC, which may be quarterly or annually depending on the type of industry. On the other hand, proprietorship businesses usually submit requirements with the DTI during registration and renewals. In other words, for small or home-based businesses, a sole proprietorship form of business is the easiest, fastest, and most affordable way to process and comply. The only drawback is that if you will register a sole proprietorship business now and you will convert it to a corporation in the future, you will need to process a formal closure of your business with the agencies you were registered (i.e., DTI, Mayor’s Office, BIR, and others) and register it again as a corporation which is a new, separate, and distinct legal entity.

By the way, if you’re a proprietor, your proprietorship business uses the same Taxpayer’s Identification Number (TIN) as yours. In other words, you and your business are the same entity for tax purposes. On the other hand, if you’re a shareholder in a corporation, the corporation uses a different TIN and is a separate entity for tax purposes. This also means that your proprietary business will be reflected in your personal ITR, while a corporation will file its own corporate ITR.

So, should you register a proprietorship business or a corporation? The choice is yours. Incorporation requires more financial, time and human resources. If you don’t have the money, if you’re not knowledgeable in the corporate setup, and if you don’t have a reliable bookkeeper or accountant who will help you on the process, then it may be wiser to initially register a proprietorship form of business.

The registration process

The business registration process in our country can be a difficult task for small business owners who don’t have any idea what to do and where to go to register their business. That is why most of them are hiring bookkeepers to do this for them. Unfortunately, some micro or small business owners can’t even afford to pay a bookkeeper.

Now let’s go back to the registration process. Actually, I have already written several articles about the different processes and steps of business registration with the different government agencies in the Philippines. Hence, you just need to read those posts for further details.

To have an idea and understand the business registration process, here is an outline of what you should do and where you should go to legalize your home-based business:

If you’re registering a sole proprietorship, you have to deal with the following offices:

5. Other government agencies – if your business needs secondary licenses. For example, pawnshops, money changer, money remittance businesses are required to register with the Bangko Sentral ng Pilipinas (BSP). Education providers may also be required to register with the DepEd, CHED or TESDA.

A Barangay business clearance is also a requirement to process your registration. You will go to the DTI first to register your trade name. Remember that your trade name will be the business name that will be printed in your Mayor’s Permit, official receipts and invoices.

Take note that having a certificate of registration from DTI doesn’t make your business legal or legitimate. It doesn’t give you the license to operate as a business. Your certificate of DTI registration is only a registration of your “Business or Trade Name”. It gives you the permit to use your “business name” but not the permit to operate as a business until you complete your registration with other agencies, like the Mayor’s Office and BIR.

In other cities of the Philippines, like Makati City, business registration can be a one-shop stop because of the government’s program to make business registration more efficient. Unfortunately, many cities and municipalities in our country are still not enabled for that.

Now if you’re registering a corporation or partnership, you should register your business first with the SEC. You may read this article to learn more about registering a corporation in the Philippines. Basically, corporations and partnerships are not already required to register with the DTI since their company or corporate name will already serve as their trade name. Their corporate name will be the name that will be printed in the official receipts, invoices and other documents of the business.

So the difference between registering a corporate business and a proprietorship business lies only with the SEC and DTI. The first should register with the SEC, while the latter should register with the DTI. The next steps are the same. Both of them need to register with the Mayor’s Office, BIR, SSS, Philhealth, Pag-Ibig Fund, and other applicable agencies, as enumerated in the list above.

Answers to frequently asked questions

I have readers and followers of this blog who are asking me the following questions. So I’ll share my answers here.

1. Is a sole proprietorship business a company?

Yes it is a company, especially if you will register a trade name with the DTI and you will hire employees. You don’t need to register a corporation to have a company.

2. What if my business is only a home-based business, is it required to be registered with government offices?

If you are earning income, you are basically liable for income tax, and if you’re doing business, you are basically liable for business taxes, which can be either VAT or Percentage tax. Hence, you are required to register with the BIR and other agencies. You can make your home-office as your registered business address. You can also claim as business expenses or tax deductions the allowable expenses you will incur in your home-based business, such as the allocated rent, electricity, water, telephone, and improvement expenses that are directly related to your business operation. Your personal or residential expenses must be separated and not be included in your business expenses for tax purposes.

3. What if I am a professional and I don’t have employees, should I register myself?

If you’re not engaging in business yet you are providing services to clients, you are also earning income which can be taxable. Therefore, you are still required to register as a professional with the applicable government offices. If you will not use a “trade name”, and will only use your “full name”, you are not required to register with the DTI. You have to pay your professional tax with the Mayor’s Office and apply for registration with the BIR. Your full name will also be the name that will appear in your official receipts. Furthermore, you have to register yourself as a self-employed member with the SSS, Philhealth and Pag-ibig Fund. To learn more, read this post on how to register as a professional with the BIR.

4. I’m afraid to do transactions with government officers because of the negative things I heard from them like extortion and corruption, what should I do? There are actually laws in the Philippines that protect citizens from abusive and irresponsible government employees and officers. One of these laws that you should remember is Republic Act No. 9485 otherwise known as the “Anti-Red Tape Act of 2007?. The Anti-Red Tape law was enacted to improve efficiency in the delivery of government service to the public by reducing bureaucratic red tape and prevent graft and corruption in government agencies and offices. Read our post about the Anti-Red Tape law to learn more. So the next time you transact with a government employee, tell him or her that you are fully aware of this law.

Victorino Abrugar is a business consultant, blogger, speaker and entrepreneur. He's the founder of Optixor, Inc., a digital marketing company based in the Philippines. Follow him on Twitter at @viclogic.

Comments

Hi. I think trading and retail are just synonymous. So either you use retail or trading in you business name, it will not really matter. The fees and taxes will vary according to your actual business’ nature, form, size, location and operation.

I would like to start a small food business – selling burgers and shakes. Do i have to register at DTI and BIR? I saw some businesses which operates but do not have such regustration – pansitan, lugawan, bbq-han, and some burger stores, too (which the likes of it i am about to open): are they liable for something? If yes, what are the penalties, if ever?

If your business is sole proprietorship, you will be using your personal TIN – you don’t need to have a separate TIN. If your business is corporation or partnership, it must have a separate TIN since both of them have separate legal identity.

Hello,just a couple of questions,what is the benefit of setting up ones business as an enterprise verses a company (sole proprietor). I was told that business taxes are paid on gross sales,is that true?

Hi. Great articles about Business ad Legalities. But what about a website business only entity and no physical operation address yet? I’ve been searching the net but when it comes to key-ing words aside from website, like business registration, permits. You’ll end up with the same standard business registration. I feel there are very few or rare articles about registering online entities as a business. Maybe you can do an article/post to shed some light on people like i’ve mentioned doesn’t know who how or where to start or how to propose that business to the govt as a business.

Hello! I have an existing TIN that i use for my sole proprietorship food business. I am planning to franchise another food line. Do i need to get another TIN for my new franchise sole prop. business? Thank you…

I have a homebase business ( internet cafe with only 8 computers). It was only registered in Barangay. Now, i want to open another business which is franchise, and one requirement needed is ITR. Since my previous work is an OFW and driver so i didn’t file yet ITR… HELP ME PLS WHAT TO DO.

Good day Sir Victorino Abrugar,
I hope you could help me to answer my questions,
My husband is a freelance construction contractor/foreman, which his projects are only houses and small commercial spaces only
but we would like to have a business name to use in any legal purposes,
And we don’t have any idea on how to compute for the taxes
What should we do ?
Thanks in advance Sir for your help and the reply..
God bless you

Hi. I am considering setting up a home business selling washable diapers (imported from China) through Facebook to customers in the Philippines. I am Filipina, live in the UK, but my family live in the Philippines and I plan for them to hold stock and send the parcels out. I plan to buy a small amount to start with, with a retail value of about 60-70k. Do I need to register a home business to do this?

Hello, I am planning to register what I am doing as my job. What I do is online services like programming, website developing, website consultation, and any other IT service related jobs. Can I register it in DTI? I am confused because it may sounds like outsourcing business. I don’t want to register in SEC because of high cost, I can only register to DTI.

Hi. I already have a business with a name “Ice Cream Place and General Merchandise” under the retailer business line but I would like to venture online selling also. Do I need to register another business name?
Thank you.